The Shanghai Stock Exchange’s reign as the premier venue for trading Chinese equities is coming to an end.
For the first time in at least a decade, China’s oldest bourse has lost its position at the top of turnover rankings for the nation’s four major trading venues. 
The new leader is Shenzhen’s Small and Medium Enterprise Board, a 12-year-old market for mostly non-state companies that first climbed to No 1 on May 17. It has since jockeyed for position with the Shanghai, with both bourses handling about 180bn yuan ($27.1bn) of trades on average over the past five days.
The development marks a dramatic reversal of fortune for Shanghai, where a speculative mania propelled trading values to all-time highs just 12 months ago. Activity has since slumped by 86% as investors shunned government-run firms in favour of “new economy” stocks that dominate the SME board.
In one example of how extreme the shift has become, turnover in Beijing Sevenstar Electronics Co, a little-known technology company, is now twice as high as that of Industrial & Commercial Bank of China, a state-owned lender whose market value is more than 100 times larger.
“Investors are dumping Shanghai as that’s dominated by traditional sectors, which don’t have much growth potential,” said Dai Ming, a money manager at Hengsheng Asset Management Co in Shanghai. “The market focus is on the small-caps.”
The SME board’s rise reflects the enthusiasm for thematic investing among China’s 107mn individual stock traders, who often crowd into sectors with compelling growth stories when the broader market is falling. 
Today, those hot industries include lithium battery makers, manufacturers of organic light- emitting dioxides and e-commerce firms.
“The SME board has more stocks available for specific thematic investments,” said Ken Chen, an analyst at KGI Securities Co in Shanghai. “Given China’s economy isn’t going to pick up soon and traditional sectors are in the doldrums, the favouring of SME stocks may last for a while.”
It helps that SME shares are more volatile than their Shanghai counterparts, a characteristic that attracts speculators keen on short-term trades. 
Price swings in the SME Board Index over the past 30 days were 53% more extreme than those of the 1,145-member Shanghai Composite, where fluctuations have been contained by state intervention in large- capitalization stocks like ICBC.
High turnover doesn’t always translate into good performance. 
The SME index has dropped 15% this year after rallying 75% in 2015 on optimism that China would transition to an economy fuelled by services and consumer spending. 
Benchmark gauges for Shanghai and Shenzhen’s main venue have retreated 18% and 16% in 2016, respectively. The SME index rose 1.2% yesterday, while the Shanghai gauge gained 0.6%.
Investors have focused on pockets of strength on the SME board, which has 790 companies with an average market value of $1.7bn.
Leading gainers on the venue include Guangzhou Tinci Materials Technology Co, which makes electrolysis for lithium batteries used in electrical vehicles, and Haoxiangni Jujube Co, which owns a leading online retailer of nuts. Guangzhou Tinci’s average daily turnover for this year was almost five times that of 2015, while Haoxiangni’s was 50% higher. Both stocks have gained more than 130% in 2016.
“With the market having very few spotlights, it’s a result of crowded trading as investors seeking absolute returns are huddling together to hold these hot stocks,” said Fu Jingtao, a strategist at Shenwan Hongyuan Group Co in Shanghai. “But for the other sectors on the SME board, we haven’t seen much fund inflows.”
Still, volume on the SME market has been busy enough to dwarf the other two trading venues in Shenzhen.
Turnover was 130% higher than the city’s main exchange on Friday and 46% above the ChiNext, a market for new economy stocks that has 512 companies.
While the SME board and Shanghai may compete for the top spot in coming months, the small-cap bourse represents the future of China’s equity markets, Fu said.
“In the short term, the trend may not last,” he said. “In the longer cycle, the hope remains that the new economy will be the future of trading.”